Social Security announces 5.9% COLA for 2022

The cost-of-living adjustment will result in the largest increase in retirement benefits and taxable wages in 40 years.

The Social Security Administration announced Wednesday that retirement benefits will increase by 5.9% in 2022, the largest cost-of-living adjustment in 40 years.

Social Security benefits rise automatically when the consumer price index for urban workers increases in the third quarter (July, August, and September) of the current year over the corresponding third quarter of the previous year.

Over the past 12 years, Social Security COLAs have averaged a meager 1.4%, including a 1.3% boost in 2021. The 5.9% COLA that will apply to benefits starting in January is the largest increase since the 7.4% COLA in 1982.

The 5.9% COLA will boost the average monthly Social Security retirement benefit to $1,657 next year, up $92 per month from this year’s $1,565 average benefit. The 5.9% COLA also increases the maximum retirement benefit, currently $3,148 per month, to $3,345 for someone who retires at full retirement age in 2022.

Anyone who is 62 or older and eligible to receive Social Security in 2022 will profit from the 5.9% COLA — even if they haven’t yet filed for benefits, so there’s no need to rush to file for Social Security before January. The 2022 cost-of-living adjustment, along with every other COLA awarded from the time individuals turn 62 until they file for benefits, is included in their future Social Security benefits.

The COLA calculation formula also means future Social Security increases could be meager or nonexistent for a few years because inflation would have to continue at relatively robust levels to exceed the current high bar. For example, the last time there was a significant COLA, of 5.8% in 2009, based on inflation in the third quarter of 2008, Social Security benefits remained flat for the following two years.

The 5.9% COLA for 2022 also affects how much beneficiaries can earn from a job without jeopardizing any of their benefits if they claim Social Security before their full retirement age.

In 2022, individuals who are under full retirement age for the full year will be able to earn up to $19,560 per year without forfeiting any benefits. That’s up from $18,960 this year. If their earnings from a job exceed that cap, they would lose $1 in benefits for every $2 earned over the $19,560 limit. The earnings cap does not apply to pensions, investments or other forms of unearned income.

In the year someone reaches full retirement, there is a more generous earnings cap. In 2022, they would be able to earn up to $51,960 in the months leading up to their full retirement age, up from $50,520 this year. The full retirement age increases to 66 and 4 months in 2022 for people who were born in 1956. If their earnings exceed that limit, they forfeit $1 in benefits for every $3 earned over $51,960 next year. Any benefits lost to the earnings cap are restored in the form of higher monthly benefits at full retirement age.

“Costs are expected to continue to climb in 2022, and we expect that to lead to continue erosion in the buying power of Social Security benefits,” said Mary Johnson, a Social Security and Medicare analyst for The Senior Citizens League. “While the higher income in 2022 is welcome, it could also mean higher taxes and even higher Medicare Part B premium costs for those who pay income-related premium surcharges.”

Employers and employees each pay 7.65% of wages to support Social Security and Medicare. Self-employed individuals pay both the employer and employee share for a combined tax rate of 15.3%.

In 2021, the 6.2% portion of the payroll tax that funds Social Security applies to the first $142,800 of gross earnings. A 5.9% COLA increases the maximum taxable wages to $147,000 in 2022. That means workers who earn $147,000 or more next year will pay an extra $260 in FICA taxes.

The Medicare portion of the tax is 1.45% on all earnings, even those above the maximum Social Security tax limit. Plus, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9% in Medicare taxes.

Most retirees should see an increase in their net Social Security benefits in 2022 even after factoring in Medicare Part B premiums, which are usually deducted directly from Social Security benefit.

In 2021, most Medicare beneficiaries pay $148.50 per month for Medicare Part B premium. High-income beneficiaries pay more. Medicare surcharges for 2022, officially known as the income-related monthly adjustment amount or IRMAA, will be announced next month.

(Questions about Social Security rules? Find the answers in Mary Beth Franklin’s 2021 ebook at

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